This chapter surveys the literature on the macroeconomic effects of government debt. It begins by discussing the data on debt and deficits, including the historical time series, measurement issues, and projections of future fiscal policy. The chapter then presents the conventional theory of government debt, which emphasizes aggregate demand in the short run and crowding out in the long run. It next examines the theoretical and empirical debate over the theory of debt neutrality called Ricardian equivalence. Finally, the chapter considers various normative perspectives about how the government should use its ability to borrow.
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ReDIF This chapter was published in: J. B. Taylor & M. Woodford (ed.) Handbook of Macroeconomics, , chapter 25, pages 1615-1669, 1999.
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Related research
This chapter was published in the following book, which is listed on IDEAS: J. B. Taylor & M. Woodford (ed.), 1999.
"Handbook of Macroeconomics,"
Handbook of Macroeconomics,
Elsevier,
edition 1, volume 1, number 1, September.
[Downloadable!] (restricted) Keywords:
Douglas W. Elmendorf & N. Gregory Mankiw, 1998.
"Government Debt,"
NBER Working Papers
6470, National Bureau of Economic Research, Inc.
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Find related papers by JEL classification: E0 - Macroeconomics and Monetary Economics - - General
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